Coles Group Ltd (ASX: COL) shares will be on watch this week.
On Wednesday, the supermarket giant is expected to release its full year results for FY 2022.
Ahead of the release, let's look to see what analysts are expecting from the company.
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What is expected from Coles in FY 2022?
According to a note out of Goldman Sachs, it is expecting the company to report a 2.2% increase in group sales to $39,417 million.
This is expected to be driven by a 2.4% increase in Food sales to $34,654 million and a 2.7% lift in Liquor sales to $3,621 million, which will offset a 4.2% decline in Coles Express sales to $1,142 million.
As a comparison, the consensus estimate is for slightly higher sales of $39,601 million for FY 2022.
What about profits?
Goldman is forecasting a spot of margin pressure, which it expects to lead to relatively flat earnings in FY 2022.
It has pencilled in an underlying net profit after tax of $1,004 million, which will be down 0.1% year over year. This is broadly in line with the consensus estimate of $1,010 million.
The broker explained:
While we expect that WOW and COL will deliver similar 4Q comps of 6.4% and 6.3% YoY respectively, we expect that WOW will deliver moderate margin expansion of 40bps due to positive mix while COL will deliver steady EBIT margins YoY given higher opex as it begins to become more proactive on digital transformation.
What else could impact Coles' shares?
Goldman also highlights that the company's outlook could have an impact on the performance of Coles' shares this week.
It concludes:
Outlook statements will be key in terms of volume demand and pricing as well as cost inflation given still elevated fresh prices as well as re-surfacing of absenteeism. Longer-term opex/capex investments will also be key especially as COL will step up to deliver Ocado and Witron investments as WOW continues to invest behind digital including market place and retail media.
Goldman Sachs currently has a neutral rating and $17.30 price target on Coles shares.
